The Company invests in residential and corporate loans. Loans are classified as either held for investment or held for sale. Loans are eligible to be accounted for under the fair value option. If loans are elected under the fair value option, they are carried at fair value with changes in fair value recognized in earnings. Otherwise, loans held for investment are carried at cost less impairment and loans held for sale are accounted for at the lower of cost or fair value.

Excluding loans transferred or pledged to securitization vehicles and loan warehouse facilities, as of March 31, 2022 and December 31, 2021, the Company reported $1.7 billion and $2.3 billion, respectively, of loans for which the fair value option was elected. If the Company intends to sell or securitize the loans and the securitization vehicle is not expected to be consolidated, the loans are classified as held for sale. If loans are held for sale and the fair value option was not elected, they are accounted for at the lower of cost or fair value. Any origination fees and costs or purchase premiums or discounts are deferred and recognized upon sale. The Company determines the fair value of loans held for sale on an individual loan basis. The carrying value of the Company’s residential loans held for sale was $1.9 million and $2.3 million at March 31, 2022 and December 31, 2021, respectively.

Given the unique nature of each underlying borrower and any collateral, the Company assesses an allowance for each individual loan held for investment. An allowance is established at origination or acquisition that reflects management’s estimate of the total expected credit loss over the expected life of the loan. In estimating the lifetime expected credit losses, management utilizes a probability of default and loss given default methodology (“Loss Given Default methodology”), which considers projected economic conditions over the reasonable and supportable forecast period. The forecast incorporates primarily market-based assumptions including, but not limited to, forward interest rate curves, unemployment rate estimates and certain indexes sourced from third party vendors. For any remaining period of the expected life of the loan after the reasonable and supportable period, the Company reverts to historical losses on a straight-line basis. Management uses third party vendors’ loan pool data for loans with similar risk characteristics to estimate historical losses given the limited loss history of the Company’s loan portfolio. Changes in the lifetime expected credit loss are reflected in Loan loss (provision) reversal in the Consolidated Statements of Comprehensive Income (Loss).

For loans experiencing credit deterioration, the Company may use a different methodology to determine the expected credit losses such as a discounted cash flow analysis. For collateral-dependent loans, if foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for any selling costs, if applicable. Additionally, the Company may elect the practical expedient for a financial asset for which the repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty by measuring the allowance as the difference between the fair value of the collateral, less costs to sell, if applicable, and the amortized cost basis of the financial asset at the reporting date.

Management assesses the credit quality of the portfolio and adequacy of loan loss reserves on a quarterly basis, or more frequently as necessary. Significant judgment is required in this analysis. Depending on the expected recovery of its investment, the Company considers the estimated net recoverable value of the loans as well as other factors, including but not limited to the fair value of any collateral, the amount and the status of any senior debt, the prospects for the borrower and the competitive landscape where the borrower conducts business. To determine if loan loss allowances are required on investments in corporate debt, the Company reviews the monthly and/or quarterly financial statements of the borrowers, verifies loan compliance packages, if applicable, and analyzes current results relative to budgets and sensitivities performed at inception of the investment. Because these determinations are based upon projections of future economic events, which are inherently subjective, the amounts ultimately realized may differ materially from the carrying value as of the reporting date.

The Company may be exposed to various levels of credit risk depending on the nature of its investments and credit enhancements, if any, supporting its assets. The Company’s core investment process includes procedures related to the initial approval and periodic monitoring of credit risk and other risks associated with each investment. The Company’s investment underwriting procedures include evaluation of the underlying borrowers’ ability to manage and operate their respective properties or companies. Management reviews loan-to-value metrics at origination or acquisition of a new investment and if events occur that trigger re-evaluation by management.


	Residential		Corporate Debt		Total
	(dollars in thousands)
Beginning balance January 1, 2022	$	2,272,072	$	1,968,991	$	4,241,063

Purchases / originations	2,025,930		171,697		2,197,627
Sales and transfers (1)	(2,550,155)		—		(2,550,155)



Principal payments	(34,284)		(174,238)		(208,522)
Gains / (losses) (2)	(60,654)		(608)		(61,262)
(Amortization) / accretion	(2,758)		1,825		(933)

Ending balance March 31, 2022	$	1,650,151	$	1,967,667	$	3,617,818


(1) Includes securitizations, syndications and transfers to securitization vehicles. Includes transfer of residential loans to securitization vehicles with a carrying value of $2.5 billion during the three months ended March 31, 2022. (2) Includes loan loss allowances.

The Company’s corporate loans also have off-balance-sheet credit exposure related to unfunded loan commitments, including revolvers, delayed draw term loans and future funding commitments that are not unconditionally cancellable by the Company. The Company utilizes the same methodology in calculating the liability related to the expected credit losses on these exposures as it does for the calculation of the allowance for loan losses. In determining the estimate of credit losses for off-balance-sheet credit exposures, the Company will consider the contractual period in which the entity is exposed to credit risk and the likelihood that funding will occur, if material. Estimated credit losses for off-balance-sheet credit exposures are included in Other liabilities on the Company’s Consolidated Statements of Financial Condition.

The Company’s residential mortgage loans are primarily comprised of performing adjustable-rate and fixed-rate whole loans. The Company’s residential loans are accounted for under the fair value option with changes in fair value reflected in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss). The Company also consolidates securitization trusts in which it had purchased subordinated securities because it also has certain powers and rights to direct the activities of such trusts. Refer to the “Variable Interest Entities” Note for further information related to the Company’s consolidated residential mortgage loan trusts.


	For the Three Months Ended
	March 31, 2022		March 31, 2021
	(dollars in thousands)
Interest income	$	73,465	$	37,109
Net gains (losses) on disposal of investments (1)	(7,338)		(5,220)
Net unrealized gains (losses) on instruments measured at fair value through earnings (1)	(415,248)		22,455
Total included in net income (loss)	$	(349,121)	$	54,344

(1) These amounts are presented in the line item Net gains (losses) on investments and other on the Consolidated Statements of Comprehensive Income (Loss)

Geographic Concentrations of Residential Mortgage Loans

March 31, 2022

December 31, 2021

Property location

% of Balance

Property location

% of Balance

California

48.4%

California

50.2%

New York

11.6%

New York

10.9%

Florida

6.8%

Florida

6.1%

All other (none individually greater than 5%)

33.2%

All other (none individually greater than 5%)

32.8%

Total

100.0%


	March 31, 2022		December 31, 2021
	Portfolio Range	Portfolio Weighted Average	Portfolio Range	Portfolio Weighted Average
	(dollars in thousands)
Unpaid principal balance	$1 - $4,396	$496	$1 - $4,382	$513
Interest rate	0.75% - 15.00%	4.02%	0.75% - 9.24%	4.04%
Maturity	7/1/2029 - 4/1/2062	4/8/2051	7/1/2029 - 12/1/2061	12/22/2050
FICO score at loan origination	588 - 832	762	604 - 831	762
Loan-to-value ratio at loan origination	7% - 103%	66%	8% - 103%	66%

The Company participates in an arrangement that provides a residential mortgage loan warehouse facility to a third-party originator. The Company has elected to apply the fair value option to this lending facility in order to simplify the accounting and keep the accounting consistent with other residential credit financial instruments with similar characteristics. At March 31, 2022 and December 31, 2021, the fair value and carrying value of this warehouse facility was $0 and $1.0 million, respectively, and reported as Loans, net in the Consolidated Statements of Financial Condition. As of March 31, 2022, the lending facility was not on nonaccrual status nor past due.

The Company’s investments in corporate loans typically take the form of senior secured loans primarily in first or second lien positions. The Company’s senior secured loans generally have stated maturities of five to eight years. In connection with these senior secured loans, the Company receives a security interest in certain assets of the borrower and such assets support repayment of such loans. Senior secured loans are generally exposed to less credit risk than more junior loans given their seniority to scheduled principal and interest and priority of security in the assets of the borrower. Interest income from coupon payments is accrued based upon the outstanding principal amounts of the debt and its contractual terms. Premiums and discounts are amortized or accreted into interest income using the effective interest method.


Risk Rating - Corporate Debt			Description
1-5 / Performing			Meets all present contractual obligations.
6 / Performing - Closely Monitored			Meets all present contractual obligations but exhibits a defined weakness in either leverage or liquidity, but not both. Loans at this rating will require closer monitoring, but where we expect no loss of interest or principal.
7 / Substandard			A loan that has a defined weakness in either leverage and/or liquidity, and which may require substantial changes to strengthen the asset. Loans at this rating level have a higher probability of loss, although no determination of the amount or timing of a loss is yet possible.
8 / Doubtful			A loan that has missed a scheduled principal or interest payment or is otherwise deemed a non-earning account. The probability of loss is increasingly certain due to significant performance issues.
9 / Loss			Considered uncollectible.

Management assesses each loan at least quarterly and assigns an internal risk rating based on its evaluation of the most recent financial information produced by the borrower and consideration of economic conditions. See below for a tabular disclosure of the amortized cost basis of the Company’s corporate debt held for investment by year of origination and internal risk rating.


	Industry Dispersion
	March 31, 2022		December 31, 2021
	Total (1)		Total (1)
	(dollars in thousands)
Computer Programming, Data Processing & Other Computer Related Services	$	464,921	$	437,257
Management & Public Relations Services	229,097		263,187
Industrial Inorganic Chemicals	155,728		156,292
Miscellaneous Industrial & Commercial	96,789		93,619
Miscellaneous Health & Allied Services, not elsewhere classified	96,104		64,133
Public Warehousing & Storage	95,037		94,179
Electronic Components & Accessories	92,166		92,261
Surgical, Medical & Dental Instruments & Supplies	80,391		80,786
Drugs	67,244		—
Research, Development & Testing Services	62,689		59,311
Engineering, Architectural & Surveying	50,023		49,088
Offices & Clinics of Doctors of Medicine	49,910		50,017
Medical & Dental Laboratories	48,603		30,199
Insurance Agents, Brokers & Service	43,360		43,598
Telephone Communications	42,651		42,589
Electrical Work	42,611		42,617
Miscellaneous Equipment Rental & Leasing	32,367		32,346
Home Health Care Services	28,600		28,660
Metal Forgings & Stampings	27,514		27,483
Legal Services	26,146		26,105
Petroleum & Petroleum Products	20,705		21,434
Sanitary Services	20,410		20,453
Grocery Stores	19,646		19,745
Coating, Engraving & Allied Services	17,742		17,705
Chemicals & Allied Products	14,626		14,657
Mailing, Reproduction, Commercial Art & Photography & Stenographic	12,431		12,388
Machinery, Equipment & Supplies	10,323		10,814
Offices & Clinics of Other Health Practitioners	10,068		10,083
Schools & Educational Services, not elsewhere classified	9,765		9,781
Metal Cans & Shipping Containers	—		118,204




































Total	$	1,967,667	$	1,968,991

(1) All middle market lending positions are floating rate.


March 31, 2022
	First Lien		Second Lien		Total
	(dollars in thousands)
Beginning balance (January 1, 2022) (1)	$	1,391,217	$	577,774	$	1,968,991
Originations & advances	154,396		17,301		171,697

Principal payments	(74,251)		(99,987)		(174,238)
Amortization & accretion of (premium) discounts	885		940		1,825




Allowance for loan losses
Beginning allowance	(17,341)		(10,579)		(27,920)

Current period (allowance) reversal	(701)		93		(608)

Ending allowance	(18,042)		(10,486)		(28,528)

Net carrying value (March 31, 2022)	$	1,471,546	$	496,121	$	1,967,667


December 31, 2021
	First Lien		Second Lien		Total
	(dollars in thousands)
Beginning balance (January 1, 2021) (1)	$	1,489,125	$	750,805	$	2,239,930
Originations & advances	1,506,705		66,013		1,572,718
Sales and transfers (2)	(1,122,275)		(83,690)		(1,205,965)
Principal payments	(492,884)		(169,057)		(661,941)
Amortization & accretion of (premium) discounts	9,120		3,497		12,617



Allowance for loan losses
Beginning allowance	(18,767)		(20,785)		(39,552)

Current period (allowance) reversal	1,426		10,206		11,632

Ending allowance	(17,341)		(10,579)		(27,920)

Net carrying value (December 31, 2021)	$	1,391,217	$	577,774	$	1,968,991


(1) Excludes loan loss allowances. (2) Includes syndications.


Amortized Cost Basis by Risk Rating and Vintage (1)
Risk Rating	Vintage
	Total		2022		2021		2020		2019		2018		2017		2016
(dollars in thousands)
1-5 / Performing	$	1,797,943	$	55,565	$	641,746	$	342,945	$	221,796	$	358,884	$	138,903	$	38,104
6 / Performing - Closely Monitored	65,000		—		22,522		26,146		16,332		—		—		—
7 / Substandard	104,724		—		—		10,323		9,276		85,125		—		—
8 / Doubtful	—		—		—		—		—		—		—		—
9 / Loss	—		—		—		—		—		—		—		—
Total	$	1,967,667	$	55,565	$	664,268	$	379,414	$	247,404	$	444,009	$	138,903	$	38,104

(1) The amortized cost basis excludes accrued interest and includes deferred fees on unfunded loans. As of March 31, 2022, the Company had $9.7 million of accrued interest receivable on corporate loans, which is reported in Principal and interest receivable in the Consolidated Statements of Financial Condition, and $0.8 million of deferred loan fees on unfunded loans, which is reported in Loans, net in the Consolidated Statements of Financial Condition.